c5 questions Flashcards
Tort is part of the law of negligence. T or F
F - negligence is one part of the law of tort
Where A is in breach of a duty of care that they owe to B and B suffers loss, A will be liable in negligence to compensate B for all the loss and damage they suffer
T or F
F - their liability will extend only to damage and loss that is not considered to be too remote
Albert owed Bella a duty of care. He made a negligent misstatement on which Bella reasonably relied. In consequence she suffered the following types of loss:
(1) Personal injury
(2) Pure financial loss
(3) Loss of earnings
(4) Damage to property Which of these is or are recoverable?
Select one:
a. None of them
b. (1) and (4) only Incorrect
c. All of them
d. (1), (2) and (3) only
D - Pure financial loss is the area of loss that the law was extended to cover in relation to negligent misstatement in 1965 so all these types of loss are now potentially recoverable
Harold decided to take over Bloggs Ltd solely on the grounds that he wished to acquire the use of certain property owned by Bloggs Ltd. Harold’s bid price reflected his desire to take over the company but also took into account the profitability of Bloggs Ltd as set out in its most recent accounts. It later turned out that the accounts of Bloggs Ltd had been prepared negligently and should have shown a smaller profit than they did. Since there is no disclaimer of liability in the accounts, Harold sues the accountants who prepared them. Will Harold succeed in an action for negligence against the firm?
Select one:
a. No, Harold’s loss was not caused by the accounts since he was going to take over the company in any event
b. Yes, the firm owed him a duty of care because it knew that Bloggs Ltd was considering the possibility of seeking outside finance
c. No, the firm owed no duty of care to a potential takeover bidder
d. Yes, the firm owed a duty of care to every person who might be expected to see the accounts
A
the “but for” - would the damage have occurred but for the accounts being wrong? no - they were going to take over anyway
Geary & Smith, a firm of accountants, acted on the audit of Musica Ltd and, owing to the negligence of the audit team manager, misrepresented the company’s financial position. Geary & Smith had known that Moments Musicaux plc had been promised a set of the audited accounts as soon as they were available in order to help it in proposing a takeover bid price that would be acceptable to the shareholders in Musica Ltd. There was no disclaimer of liability in the audit report. Can Moments Musicaux plc sue Geary & Smith in the tort of negligence?
Select one:
a. No, because its loss is purely financial and it should have carried out its own professional investigation into the accuracy of the accounts
b. No, because no duty of care is owed to potential investors, only to the existing body of shareholders as a whole
c. Yes, because when a takeover is anticipated, a special relationship arises between accountants and all recipients of the accounts
d. Yes, because Moments Musicaux plc was a bidder known to Geary & Smith to be highly likely to rely on the accounts
D - In such circumstances, the court is likely to consider that the accounts were prepared for the purpose of assisting the takeover and not just for audit purposes. It is established that G&S has a duty of care to MM through their knowledge of the intention to rely. Given that negligence appears not to be in question, this establishment of duty of care is likely to lead MM having a successful case. This is NOT a general assumption as implied by option C.
Which of the following is irrelevant in determining whether a duty of care exists?
A Whether it is fair that the law should impose a duty on the defendant
B Whether the defendant intended to cause injury to the claimant
C Whether it was reasonably foreseeable that the claimant might suffer damage as a result of the
defendant’s actions
D Whether there is sufficient proximity between the parties
B - This may be relevant when assessing damages but is not relevant to whether a duty of care exists at
all.
Which of the following statements is incorrect?
A If the defendant succeeds in arguing res ipsa loquitur , the burden of proof is then on the
claimant to show negligence.
B In arguing res ipsa loquitur , it must be shown that the thing that caused the damage was under
the management and control of the defendant.
C Res ipsa loquitur is relevant where the reason for the damage is not known.
D Whether a breach of the duty of care has occurred is a matter of fact.
A - Res ipsa loquitur is an argument by the claimant that ‘the facts speak for themselves’ in pointing to a
breach on the part of the defendant. The burden of proof then shifts to the defendant to show that
they were not negligent.
All of the following options, except one, must be shown by a claimant in order to succeed in an
action for negligence.
Requirement
Which is the exception?
A That the defendant owed them a duty of care.
B That the defendant was in breach of a duty of care.
C That the claimant suffered injury, damage or loss as a result of a breach of a duty of care.
D That the damage was not too remote.
D - Whether the damage was too remote is a matter for the court to decide in assessing damages once
negligence has been shown (ie, once the claimant has proved the other three options satisfactorily).
Anton is learning to drive with his father when he mistakenly goes into reverse gear instead of first
gear and hits a pedestrian on the road behind him. Although he is moving very slowly, the elderly
and frail pedestrian suffers bruising, but also a heart attack induced by the shock. She dies within
minutes.
Requirement
Which of the following best describes the legal position?
A The standard of care owed by Anton is that of a reasonable learner driver and the fact that she is
especially vulnerable is irrelevant.
B The standard of care owed is that of a reasonable driver and it is irrelevant that she was
especially vulnerable.
C The standard of care owed is that of a reasonable learner driver but the fact that she was
especially vulnerable means that a higher standard will be applied.
D The standard of care owed is that of a reasonable driver but the fact that she was especially
vulnerable means that a higher standard will be applied.
B - The defendant’s lack of qualification will not be taken into account to reduce the relevant standard of
care, which is that of a reasonable (qualified) driver. The fact that the claimant is especially vulnerable is only relevant to the standard of care applied, if the defendant is aware of that fact, and such
knowledge has the effect of raising the standard of care to be met in discharging the duty of care
Jasmine drives in a careless fashion down a narrow street with cars parked on each side of the road,
actually knocking the wing mirrors off two of the cars. While Naomi is watching her, she trips on some
tools that have been left out by council workers laying new kerbstones and breaks her ankle.
Requirement
Which of the following best describes the legal position?
A Jasmine is liable because her negligent driving causes Naomi to trip.
B Naomi is liable because she does not look where she is going.
C The local authority is liable because its workers are negligent in leaving tools on the pavement.
D Jasmine and the local authority are both liable because they both caused her injury.
C - This is a difficult area of the law. However, it is likely that the conclusion would be that the tools carelessly left on the pavement caused the accident. The local authority may argue that Naomi was
contributorily negligent in not taking sufficient care herself. The injury is likely to be considered to be
too remote to give rise to any liability on Jasmine’s part.
An accountant has given incorrect tax advice to one of their clients. The error on the part of the
accountant constituted negligence. They face potential liability in:
A contract only
B tort only
C contract and tort
D neither contract nor tort, but in misrepresentation
C - Contractual liability may arise where he gives the advice in performance of a contract. Tortious
liability may arise even where there is no contractual or fiduciary relationship between the parties.
Brown & Cameron, a firm of accountants, prepares accounts for Target plc, showing a profit of
£800,000 when they should, in fact, have shown a loss of £8,000. Marnie owned 300 shares in the
company and, after reading the accounts that were sent to her (as to all shareholders), she purchased
an additional 500 shares. When it came to light that the accounts had been prepared negligently
(and the share price tumbled as a result of that negligence), Marnie sued the accountants for
negligence. There was no disclaimer of liability in the audit report.
Requirement
Which of the following best describes the legal position in respect of the potential liability of the firm,
Brown & Cameron to Marnie?
A It is liable because the partners in the firm knew that the accounts would be sent to all
shareholders.
B It is liable because it was reasonably foreseeable that existing shareholders would rely on the
accounts for the purpose of reviewing their investments.
C It is not liable because Marnie bought her shares on the Stock Exchange and not from the
company.
D It is not liable because the firm did not owe a duty to existing shareholders who rely on the
accounts for a purpose other than that for which they were intended.
D = The facts are similar to the Caparo case. The basic view is that the accounts are intended to enable
shareholders to exercise their rights regarding the management of the company and not to make
investment decisions. (Special circumstances may apply, of course, so that a different conclusion is
reached, but there are none in this case.)
Marni is managing director of Eastreach Ltd. Knowing that the finance director, Finley, was
undergoing cancer treatment, Marni asked Tristan, an accountant, to prepare the company’s
accounts. Tristan provided the accounts in draft and Marni asked Finley to check that he was happy
with them. While awaiting Finley’s review, George, Tristan’s brother (and business rival), saw the draft
accounts and bought the entire 51% shareholding in Eastreach Ltd owned by Brigitte. When Finley
had finished checking the accounts, it was discovered that Tristan had made significant accounting
errors and had shown the company to be significantly more profitable than it was: in fact the
company was heading for insolvency. Brigitte is delighted but George sues Tristan for his negligence,
noting that Tristan had not made any disclaimer of liability in respect of his work.
Requirement
Which of the following statements is incorrect?
A Tristan owed a duty of care because George was known to him.
B Tristan owed no duty of care because he did not know that George would look at the accounts.
C Tristan owed a duty of care to Marni.
D Tristan owed no duty of care to Brigitte.
A - It was not known that George was planning to take control of the company.
Tina, a trainee accountant, was approached by Kevin, the husband of Tina’s senior colleague, Jill, at
an office party. Kevin asked her for some professional advice. Flattered that he had asked her rather
than Jill, Tina obliged. However, her advice was flawed.
Requirement
Is she liable for the resulting loss suffered by Kevin?
A No, because she is only a trainee.
B No, because the advice was not given in a professional context.
C Yes, because she knows him and assumes responsibility for her advice.
D Yes, because she owes a duty of care for which the standard is that of a reasonable qualified
accountant.
B - There can be no liability for advice given on social or informal occasions unless there are exceptional
circumstances (and there are not in this case).
Tim, an accountant, prepares financial statements for MarkUp plc, knowing that the company was
considering three takeover bids, including one from Growth plc. There was no disclaimer of liability
in the accounts.
In the event that Tim prepares the statements negligently, indicating that the company is financially
secure when it is not, and Growth plc takes over MarkUp plc on the basis of those accounts:
Can Growth plc recover any resulting losses it makes on the takeover?
Yes A
No B
Will Tim be liable to pay damages to the other takeover bidders where they were also identified to
him as potential takeover bidders who would be relying on the accounts?
Yes C
No
A D
They will not have suffered any loss
